Fed's Waller Says Treasury Safety Premium Is Gone, Lifting Neutral Rate View

Federal Reserve Governor Christopher Waller said on September 3 that the so-called safety premium on U.S. Treasuries — the extra price investors were willing to pay just for the safety of government debt — has gone away. That matters because it implies the neutral rate, the interest rate level that neither stimulates nor restricts the economy, may need to sit higher than markets have priced. The comments came even as the U.S. bond market extended a global rally, with Waller's remarks framed by wire reports as providing "some relief" to bond investors. The apparent tension — a Fed official arguing for a higher neutral rate while bonds rally — leaves the near-term path for yields unresolved. What is unresolved: whether Waller's neutral-rate argument shows up in the Fed's next set of economic projections, and whether it changes market pricing for the next rate decision.